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Ottawa’s commitment to innovation will require a change in our IP debate

Blayne Haggart is an assistant professor of political science at Brock University and the author of Copyfight: The Global Politics of Digital Copyright Reform.

The government's commitment in the federal budget to "define a new bold plan, its Innovation Agenda," is a promising sign that Ottawa intends to take seriously the crucial issue of reforming Canadian economic policy for the challenges of the 21st century. While this agenda is currently mostly aspirational, its commitment to build "a better evidence base to identify gaps, evaluate performance and inform future decisions" on innovation policy is encouraging.

However, evidence is only useful if you can see reality clearly, and as the debate over the Trans-Pacific Partnership's intellectual property (IP) provisions demonstrates, 20 years into the information age, we need to get a lot better at understanding what type of knowledge policies are best suited for a small, open economy such as Canada's.

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As the University of Toronto's Dan Breznitz has written: "In the 21st century, prosperity comes from ideas commercialization throughout the private sector." IP laws are a key component of this process. They determine who is allowed to use what knowledge and how they're allowed to use it. Done well, they encourage the creation of new firms, products and jobs. Done poorly, they create monopolies that throttle innovation and consumer choice.

Intellectual property policy is economic policy. And yet for decades, Canadian IP policy has been driven by the desire to harmonize our rules within international agreements such as the TPP, not by a consideration of what policies would be best for Canada's economy. Even worse, our analyses of these agreements are still based on a 20th-century view of the world. As Dan Ciuriak, co-author of an assessment of the TPP, remarked to the Senate committee on foreign affairs and international trade: "We're not well equipped to provide you with advice and analysis of an agreement on the 21st-century economy."

Consequently, the quality of expert economic analysis is problematic. Writing in these pages, Atlantic Provinces Economic Council CEO Finn Poschmann said it's "anybody's guess" whether IP's share of 1 per cent to 2 per cent of gross business input costs is "high or low." Similarly, he says that while the TPP's copyright provisions "will do nothing for consumers or creativity," they fall "in the category of a minor annoyance on the way to a deal."

Such vagueness does not exactly inspire confidence. Nor does the dismissal of the agreement's effect on consumers, given that improving consumer welfare is the whole point of these agreements. Far from being a "minor annoyance," the cost of these agreements' copyright provisions could be substantial.

The Australian Productivity Commission found that the 2005 Australia-U.S. free-trade agreement's copyright provisions could eventually cost the country up to $88-million (Australian) a year, due in part to longer copyright terms.

But we're just not sure. A recent review of the actual impact of the AUSFTA's copyright provisions on Australia couldn't confirm any direct effect, positive or negative.

Most concerning is that even these attempts at analysis don't capture how intellectual property affects firms' ability to innovate. Stronger IP protection isn't just a "minor annoyance." Economists Michele Boldrin and David Levine have noted that James Watt's 1769 patent on the separate condenser, an invention that improved steam engine efficiency and laid the foundation for the Industrial Revolution, actually stymied further innovation – and the attendant benefits to society – until the patent expired in 1799.

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Economists are increasingly worried that these agreements – which we don't fully understand – are locking in IP regimes that actively impede innovation. So says Nobel economics laureate Joseph Stiglitz, one of the pioneers of the economics of innovation. Milton Friedman, his ideological opposite, was similarly against copyright term extensions, which we have in the TPP.

Nor do our IP policies take into account the changing global IP landscape. Global patent filings have exploded, with China leading the way. Unfortunately, Canada lacks the size to mimic China's strategy of locking down all the economically valuable knowledge it can. The TPP's "level playing field" touted by advocates won't help because the playing field itself is the problem.

After decades of treating IP as a secondary issue, this budget represents an opportunity to get our policy back on track. We need to build the capacity of academics and experts to determine the costs and benefits of these agreements, and what IP policies work best for Canada, given a world of agreements like the TPP and patent mills like China. This daunting task will require a substantial change in our approach, but if the government wants its evidence base to be useful, it needs to start by ensuring we can ask and answer the right questions.

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